I'm less than two years from my expected FI date and I want to dramatically reduce the risk in my portfolio. The way it is now, if my returns significantly beat expectations maybe I'll retire half a year earlier, but if my returns match some of the worst scenarios historically, that could push me back years! Way more downside than the potential upside for my situation.
I also think it's especially risky to own US stocks and long term bonds right now if you care about short term returns. I want to stick to low-priced international equities and bonds, and only Short Term for US bonds. Throw in some gold and I think I've got some decent diversification.
And so I present this low drawdown FI home stretch portfolio:
25% international bonds - in reality I would do a smaller but riskier combo of EM bonds + LendingClub
25% short term treasury
15% international value
Returns and Drawdowns
Using the Long Term Returns calculator, over 2 years the upside CAGR is 15% but the downside CAGR is only -3%! Compare to the Permanent Portfolio where the upside CAGR over 2 years is 15% but the downside is -7%. I'm a lot more comfortable with a historical drawdown of about 5% with this portfolio vs. the 13% of the PP to get me to my FI date within a window of a few months - this is more important to me than a percent or two difference in returns over the next couple of years.
As always, past correlations do not guarantee future correlations and all that jazz, but this looks to me like a great way to almost-guarantee meeting my financial goals.